The acquisition of tw telecom by Level 3 Communications, Inc. is expected to create a bigger, more agile and more competitive unit that will be better poised to take on the market challenges and serve global communications needs. According to a statement, both US-based Service Providers have entered into a definitive agreement, whereby Level 3 will acquire tw telecom in a stock-and-cash transaction valued at $40.86 per share based on market close as of June 13, 2014. tw telecom stockholders will receive $10 cash and 0.7 shares of Level 3 common stock for each share of tw telecom common stock that is owned at closing.
The acquisition will confer great benefits to customers of both companies with Level 3's global customers having access to tw telecom's deep metropolitan footprint and buildings connected to the network, enabling a higher quality and more reliable on-net experience for customers doing business in North America while tw telecom's customers will benefit from Level 3's extensive local-to-global footprint, with owned network and data centers in more than 60 countries and significant global subsea networks. According to both companies, they have developed a strategy and commitment to delivering an excellent customer experience, which will be a key pillar of the combined company. Apart from enhancing their value to their subscribers, the companies expect to benefit from their close geographic proximity, previous integration experience of both companies and tw telecom's fully integrated operating platform.
According to the reported valuation, the company estimates that the net present value of the potential synergies will be approximately $2 billion. The company expects to realize approximately 70 percent of expected Adjusted EBITDA savings within 18 months after closing the transaction. The combined company had pro forma revenue of $7.9 billion and Adjusted EBITDA of $2.2 billion before synergies and $2.4 billion including expected run-rate expense synergies for the twelve months ending March 31, 2014.